Which green matters for whom? Greening and firmperformance across age and size distribution of firms

Mili Shrivastava & Jagannadha Pawan Tamvada

Accepted: 30 June 2017 /Published online: 17 November 2017

Abstract A growing body of literature links firmperformance with sustainability efforts. We contrib-ute to this literature by developing a novel frame-work for contextualising greening through the lensof tangibility and visibility of greening activitiesand examine the impact of different types ofgreening on firm performance along the age andsize distribution of firms. The empirical resultsbased on a large-scale database suggest that re-wards to different types of greening differ acrossage and size distributions.

Keywords Green entrepreneurship . Green start-ups .

Sustainability .Typesofgreening .Greening framework .

Age and size distribution of firms . Firm growth .

Performance

1 Introduction

Sustainable development and the role of firms as agents ofsustainable development is a topic of remarkable scholarlyinterest. Firms are typically considered as entities with solemotives of profit maximisation. Although a tradeoff be-tween profit maximisation and sustainable businessmodels was traditionally assumed, an emerging body ofresearch suggests that firms can boost their performancewhile pursuing strategies that are considerate towards theenvironment (Hart and Ahuja 1996; Stefan and Paul2008). A compelling stream of literature on sustainabilityhas emerged that primarily focuses on how sustainableprocesses can be designed and developed for largeestablished firms (King and Lenox 2001; Margolis andWalsh 2001; Stefan and Paul 2008). However, young andsmall firms can be agents for offering radical solutions tothe challenges of sustainability, as they have an advantagein innovation (Acs and Audretsch 1990). In this context,Klewitz and Hansen (2014) provide a systematic review ofsustainable innovation practices of small and medium-sized enterprises and suggest that they innovate differently.

The literature considers a wide range of greening initia-tives of firms such as incorporating environmental man-agement systems, obtaining compliance certifications, re-ducing emissions, and offering green products and ser-vices. However, there is no single framework that under-pins the differences between these greening approachesand their impact on firm-level performance outcomes. Webridge this gap by developing a novel greening frameworkthat consolidates these different greening initiatives usingthe lens of their tangibility and visibility to stakeholders.

Small Bus Econ (2019) 52:951–968DOI 10.1007/s11187-017-9942-y

M. ShrivastavaDepartment of Leadership, Strategy and Organisations, Faculty ofManagement, Bournemouth University, Bournemouth, BH8 8EB,UKe-mail: mshrivastava@bournemouth.ac.uk

J. P. Tamvada (*)Southampton Business School, University of Southampton,Highfield Campus, Southampton, UKe-mail: jp.tamvada@soton.ac.uk

J. P. TamvadaCentre for India and Global Business, University of Cambridge,Cambridge, UK

# The Author(s) 2017. This article is an open access publication

Furthermore, while several meta-analyses suggest thatthere is a positive relationship between green initiatives offirms and their performance (Margolis and Walsh 2001;Orlitzky et al. 2003; Allouche and Laroche 2006; Stefanand Paul 2008), little is known about how they differen-tially impact entrepreneurial young firms and mature in-cumbents or small and large firms. We bridge this impor-tant gap in the literature by linking different greeningstrategies with firm performance across the age and sizedistribution of firms. The empirical results based on alarge-scale Eurobarometer database suggest that externalgreening activities have a positive impact on the perfor-mance of young firms and small firms. In contrast to this,internally perceived green processes play a significant rolefor middle-aged firms and large incumbent firms.

The paper makes several compelling contributions tothe existing literature. Firstly, building on the input-outputframework (Busch and Hoffmann 2011; Lannelongueet al. 2015), it presents a novel greening framework forcontextualising greening by firms. Secondly, it providesthe first insights into how different types of greeningimpact firm performance along the size and age distribu-tion of firms. Thirdly, the large-scale database used for theempirical analysis includes firms from 38 different econo-mies giving an opportunity to draw broad conclusionsabout the impact of greening on firm performance at aninternational scale.

The rest of the paper is organised as follows. Section 2provides the theoretical background for the paper anddevelops the greening framework. The section presentsthe hypotheses linking greening initiatives and firm per-formance across the age and size distribution of firms.Section 3 discusses the database and themethodology usedfor the empirical analysis. Section 4 presents the empirical

results. Section 5 provides a discussion of the results andconcludes the paper.

2 Theoretical background

The link between environment and business has receivedincreasing attention in scholarly literature (Bansal andRoth 2000). Although the question of whether it pays tobe green has been addressed by numerous studies, it is farfrom conclusive. While traditionally it was assumed thataddressing environmental concerns of firms’ activitiesleads to increased costs for the firms (Coase 1960; Grayand Shadbegian 1993; Walley and Whitehead 1994), anemerging body of literature suggests that there may not bea contradiction between firms’ discharging their environ-mental responsibilities and realising their economic goals(Porter and Van der Linde 1995; Nehrt 1996; Sharma andVredenburg 1998; Dowell et al. 2000; Stefan and Paul2008; Nishitani 2011).

In this context, Busch and Hoffmann (2011) suggestthat both inputs and outputs relate to firms profits whileLannelongue et al. (2015) examine the impact of bothgreen inputs and green outputs on firm performance.Their results suggest that green inputs, as well as greenoutputs, impact the financial performance of firms. Wetake this as a starting point for developing a new theo-retical greening framework that characterises greeningactivities of firms as tangible or intangible activities thatare visible externally or internally to the firm.

While some green activities and initiatives of firms arevisible externally, others are internal processes that aremainly known to their management and employees. Forinstance, offering a green product or service in the

952 M. Shrivastava, J. P. Tamvada

Visibility

Tangibility

External Internal

Tangible Offering green products and services

Q1

Investing in equipment, hiring employees for greening

Q3

IntangibleSigning up to Environmental Management Systems, Certifications

Q2

Going beyond compliance requirements, incorporating more green processes in production

Q4

Fig. 1 Greening frameworkmodel

marketplace is visible externally while hiring employeesfor green tasks is mainly known within the firm. Theformer is a tangible output and the latter is a tangibleinvestment. Similarly, there are intangible green processesthat the external world can be made aware of, for example,through environmental certifications, and intangible green-ing processes that aremainly perceived internallywithin thefirm such as a firm adopting green processes for its pro-duction activities.

Figure 1 summarises the greening frameworkmodel. Inthe first quadrant (Q1), firms have tangible green outputsthat are visible externally. In the second quadrant (Q2),firms signal to the external world about their intangiblegreen processes using environmentalmanagement systemsand certifications. In the third quadrant (Q3), firms havetangible investments such as employees hired for greeningrelated tasks and, in the fourth quadrant (Q4), firms haveintangible greening processes that are known mainly totheir management and employees.1

While a majority of studies support the view that green-ing improves firm performance (Porter and Van der Linde1995; Hart 1995; Hart and Ahuja 1996; Klassen andMcLaughlin 1996; Sharma and Vredenburg 1998;Reinhardt 1998; Klassen and Whybark 1999; Dowellet al. 2000), few studies have suggested that it may havea negative effect (Cordeiro and Sarkis 1997; Sarkis andCordeiro 2001). However, several meta-analyses confirm apositive link between environmental performance and firmperformance (Margolis and Walsh 2001; Orlitzky et al.2003; Allouche and Laroche 2006; Stefan and Paul 2008).Consistent with the findings of these meta-analyses, wehypothesise that all forms of greening have a positiveimpact on the firm’s performance.

H1a: Externally tangible greening, as well as intan-gible greening, have a positive impact on firmperformanceH1b: Internally tangible greening, aswell as intangiblegreening, have a positive impact on firm performance

However, the ‘who, how and when’ it pays to be greenare compelling questions that go beyond the basic questionof whether it pays to be green. We use the greeningframework conceptualised above to answer these

questions along the age and size distribution of firms. Inthis context, Hockerts and Wustenhagen (2010) suggestthat a co-evolution of sustainability practices in entrepre-neurial firms and large incumbent firms is more likely tolead to sustainability at industry level as Emerging Davids(small entrepreneurial firms) fail to reach broad massmarkets but are more willing to pursue risky innovations(Coad et al. 2016) while the sustainability efforts ofGreen-ing Goliaths (large incumbents) are incremental and non-efficient (Hamschmidt and Dyllick 2001; Schaltegger2002) as they face a real risk of cannibalising their marketshare (Nicholls and Opal 2005).

While greening may lead to competitive advantage forlarge incumbent firms (King and Lenox 2001; Esty andWinston 2009), entrepreneurial firms solve problems ofenvironmental degradation by identifying and exploitingopportunities resulting from existing market failures(Cohen and Winn 2007; Dean and McMullen 2007) anddo things that incumbent firms and institutions do notpursue (York and Venkataraman 2010). Consistent withthis view, Stenzel and Frenzel (2008) show that incum-bents reluctantly adopt renewable energy but a co-evolutionary process between regulatory environmentand technology strategies leads to their gradual adoption.Similarly, Wüstenhagen et al. (2003) suggest that whilesmall firms initially offered green electricity in Switzer-land, large incumbents slowly adopted the strategy ofoffering green products at different time points.

Thus, while incumbent firms may be hesitant to intro-duce products that cannibalise their existing products asthismay impact their customer base, new entrants aremorelikely to identify niches and pursue them aggressively(Bhide 1994) while undertaking risky innovations (Coadet al. 2016). Young firms have a higher probability ofinnovation (Huergo and Jaumandreu 2004) and are morelikely to have a greater R&D intensity than old firms whenentering new markets (Czarnitzki and Kraft 2004) whilehaving superior technical quality innovations(Balasubramanian and Lee 2008). Thus, green productsand services offered by incumbent firms may not beradically different from their existing product portfolio,and producing these products may not have a dramaticimpact on their performance. In contrast to this, the greenproducts and services offered by new entrants are morelikely to cater to an emerging trend or a niche market andare more likely to impact firm performance positively.

Furthermore, as Djupdal andWesthead (2015) suggest,externally intangible strategies such as certifications en-able very young firms to address the liabilities of newness

1 A firm that adopts these will be present inmore than one quadrant if itpursues more than one of the above greening strategies. For example, ifthe firm offers greens products in the market place and also hascertifications about its environment initiatives, it has both tangibleand intangible greening processes that are visible externally.

Which green matters for whom? Greening and firm performance across age and size distribution of firms 953

and the liabilities of smallness but these are not helpful asfirms grow. Thus, externally tangible green initiatives suchas offering green products or services and externally in-tangible green initiatives such as obtaining environmentalcertifications are likely to have a positive impact on theperformance of young firms with the impact diminishingas firms mature. For these reasons, we hypothesise thatexternal green signals have differential impacts across theage and size distribution of firms.

H2a: For entrepreneurial firms, external green strat-egies have a positive impact on firm performanceH2b: As firms mature, external green strategieshave a decreasing impact on firm performance

As firms undertake internally tangible greening initia-tives such as hiring more green employees or internallyintangible greening initiatives such as going beyond com-pliance requirements, they signal to their existing em-ployees that they are taking proactive steps towardsprotecting the environment. This may positively impacttheir motivation (Temminck et al. 2015) and lead to anincreased firm performance. These internal greening pro-cesses may result in cost-savings and efficiency gains asfirms mature and, as Ford et al. (2014) suggest, firms maygo beyond compliance requirements in pursuit of theircompetitive strategy. Consistent with these views, Chenet al. (2016) find that proactive engagement with environ-mental practices has a positive impact on the performanceof large multinational firms, and Delmas et al. (2015)suggest that proactivity in going beyond environmentalcompliance requirements has a positive impact on firmperformance in the long run. Furthermore, incumbentscan innovate through processes (Hamschmidt andDyllick 2001) or imitate rapidly successful sustainableinnovations (Hockerts 2006). For these reasons, wehypothesise that tangible, as well as intangible internalgreening, have a positive impact on firm performanceacross the age and size distribution of firms.

H3a: For entrepreneurial firms, internal green strat-egies have a positive impact on firm performanceH3b: As firms mature, internal green strategieshave a positive impact on firm performance

An important consideration is the potential of firmsengaging in multiple greening strategies. For example,firms may pursue both tangible and intangible greeningstrategies or both internal and external greening

strategies. While on the one hand pursuing multiplestrategies may positively impact the firm, the multiplic-ity strategy can also increase the cost of greening for thefirm. Thus, these contrasting effects together determinewhether a firm experiences a net benefit from simulta-neously pursuing multiple greening strategies.

3 Methods

3.1 Data and variables

We use a large-scale database commissioned by theEuropean Commission, the Eurobarometer surveyEurobarometer (2012), for testing the hypotheses devel-oped in Section 2. The data were collected throughtelephonic interviews from an international business reg-ister. Firms from 38 different countries were selectedusing a stratified sampling procedure.2 Although theoriginal size of the sample is 13,167 firms, data of thedependent variable are available for 12,272 observations.Introducing the four greening strategies variables in theregression reduces the sample size to 9606 observations.Adding the firm size variables and the sampling weightsbrings the final sample size to 9236 observations.3

3.1.1 Dependent variable

Change in turnover The dependent variable is derivedfrom a question in the database that asks if the firm’sturnover has decreased, remained same or increased inthe last 2 years. This is the only measure of firm perfor-mance available in the database. As Table 1 shows,33.1% of the firms in the sample have experienced adecrease in turnover, while turnover has remained samefor 26.6% of the firms and turnover has increased for40% of the firms in the database.

3.1.2 Independent variables

The four different greening processes identified in thetheory section are the main independent variables.

2 The list of countries included in the data collection process is given inthe Appendix in Table 12.3 The mean values of the variables in the full sample and the finalsample are not statistically different suggesting that exclusion is mostlyrandom and not systematic.

954 M. Shrivastava, J. P. Tamvada

GS1. Green Product or Service (Tangible-ExternalGreening) This variable takes value 1 if the firmoffers a green product or service to its customers.As Table 1 suggests, 30.3% of the firms in thedatabase offer a green product or service.GS2. Environmental Management System (Intangi-ble-External Greening) If a firm has one of theformalised environmental management systems suchas ISO14001, ISO14064, ISO16000 or others, thevariable takes value 1 and 0 otherwise. Although theprocesses underlying these certifications may not beclear, firms declare these certifications to potentialconsumers and they are known externally. As Table 1suggests 38.6% of firms in the database have envi-ronmental management systems in place.

GS3. Green Jobs Prop. (Tangible-Internal Greening)This variable is derived from a question in the surveythat asks how many of the full-time employees of thefirm work in green jobs some or all the time. Accord-ing to the questionnaire, a ‘green job is one thatdirectly works with information, technologies, or ma-terials that preserves or restores environmental quality.This requires specialised skills, knowledge, training,or experience.’As the number of green jobs cannot beviewed independently of the firm size, a new variableon the proportion of green jobs is constructed.4 Themean of this variable is 0.16 suggesting that, on anaverage, around 16% of full-time employees are en-gaged in green activities.GS4. Beyond Compliance (Intangible-InternalGreening) The variable takes value 1 if a firm goesbeyond complying with environmental legislations.As Table 1 suggests, 26.1% of the firms in the data-base proactively go beyond complying with environ-mental legislations.

3.1.3 Control variables

External support We control for the impact of externalsupport as firms that receive external support are morelikely to have an increased turnover. While half of thefirms in the sample have received no external support,9.15% have received financial support and 40.50% havereceived non-financial support.5

Market type The market type is controlled in the esti-mation as the market segment that firms supply to has animpact on their turnover. While 60.7% of the firm sup-ply to consumers, 70.2% supply to companies and

4 The exact number of employees is unavailable, and the employeesizes are coded in intervals such as 0 to 10 employees, 11–50 em-ployees, 50–250 employees, 250–750 employees. We divide the num-ber of green jobs by the midpoint of these intervals to derive theproportions.

5 The question asked in the questionnaire is as follows: ‘Which type ofexternal support does your company get in relation to its environmentalactions?’. The answers to this question are from the following a. Publicfunding (grants or guarantees) b. Private funding from bank or investmentcompanies c. Venture capital fund d. Advice or other non-financial assis-tance frompublic administration e. Advice or other non-financial assistancefrom private consulting and audit companies. f. Advice or other non-financial assistance from business associations. Firms that selected anyone of the a. b. or c. options are classified as having received externalfinancial support, and firms that selected any one of d. e. or f. are classifiedas having received external non-financial support.

Table 1 Descriptive Statistics

Dependent variable:

Turnover Decreased 33.40%

Turnover Remained Same 26.60%

Turnover Increased 40.00%

Independent variables:

GS1 Green Product or Service (Tangible-External) 30.30%

GS2 Env. Mang. Sys (Intangible-External) 38.60%

GS3 Green Employees Prop. (Tangible-Internal) 0.16

(0.46)

GS4 Beyond Compliance (Intangible-Internal) 26.10%

Number of Green Strategies 1.387(1.169)

Controls variables:

Financial support 9.15%

Non-financial support 40.50%

Consumers 60.70%

Companies 70.20%

Public Bodies 30.30%

Age 24.2

(23.59)

Employees: 1 to 9 42.50%

Employees: 10–49 32.40%

Employees: 50–249 18.10%

Employees > 250 6.95%

Manufacturing 27.50%

Retail 24.10%

Services 24.90%

Mining and other Industries 23.50%

N 9236

Standard deviation in parentheses

Which green matters for whom? Greening and firm performance across age and size distribution of firms 955

30.3% supply to public bodies. Thus, firms in the sam-ple supply to more than one market segment.

Age, size and sector Following a large body of literaturethat suggests that age, size and industrial sector have animpact on firm growth (Coad 2008), we control for theseeffects. The average age of firms in the database is24.20 years. The standard deviation of the age variableis 23.59 suggesting that there are several young as wellas mature firms in the database. While 42.5% of thefirms have less than 10 employees, 32.4% of the firmshave more than equal to 10 and less than 50 employees,18.1% of the firms have more than equal to 50 and lessthan 250 employees, and 6.95% of firms havemore than250 employees. The four main industry sectors ofmanufacturing, retail, services, and mining with otherrelated industries are almost equally represented in thedatabase.

Table 2 presents the correlations between the fourgreening variables. Although the correlations are sig-nificant suggesting that firms are engaged in multiplegreening strategies, the correlations are small in mag-nitude. Table 3 summarises the adoption of the green-ing strategies across the age and size distribution offirms. In particular, the table suggests that the pro-portion of firms engaging in greening strategies in-creases along the age distribution and size distribu-tion of firms. As the first row suggests, while 28.30%of firms that are less than or equal 10 years old have

introduced a green product or service (GS1), 37.2%of firms that are older than 50 years have introduced agreen product or service. Similarly, while 28.8% offirms that have less than 50 employees have intro-duced a green product or service (GS1), 39.3% offirms that have more than 250 employees have intro-duced a green product or service. This pattern existsfor all the greening strategies.

3.2 Estimation models

For estimating the impact of the different types ofgreening processes on firm performance, ordered probitmodels are estimated in Tables 4, 5, 6, and 7, as thedependent variable is in an ordered form with firmsexperiencing a decrease in turnover, having the sameturnover as in the previous period, or having an in-creased turnover. The core estimated equation is givenas

y ¼ αþ β1 GS1ð Þ þ β2 GS2ð Þ þ β3 GS3ð Þþ β4 GS4ð Þ þ β5 numgreenð Þþ β6 externalsupportð Þ þ β7 markettypeð Þþ β8 firmageð Þ þ β9 firmsizeð Þ þ β10 sectorð Þþ β11 locationð Þ þ e

Table 2 Correlations between greening strategies

GS1 GS2 GS3 GS4

GS1. Green Product or Service (Tangible-External) 1

GS2. Env. Mang. Sys (Intangible-External) 0.0689*** 1

GS3. Green Employees Prop. (Tangible-Internal) 0.204*** 0.0386*** 1

GS4. Beyond Compliance (Intangible-Internal) 0.149*** 0.148*** 0.0532*** 1

Table 3 Descriptive statistics

Greening Variable All Age< =10 years

Age10–49 years

Age> = 50 years

Size< 50 Emp.

Size50–249 Emp.

Size> 250 Emp.

GS1 30.30% 28.30% 30.10% 37.20% 28.80% 33.30% 39.30%

GS2 38.60% 32.60% 39.50% 50.30% 31.60% 54.90% 70.40%

GS3 43.80% 40.70% 43.70% 53.30% 39.00% 53.80% 68.70%

GS4 26.10% 22.80% 25.70% 37.80% 21.50% 36.20% 49.70%

N 9236 2759 5505 972 6918 1676 642

956 M. Shrivastava, J. P. Tamvada

Table 4 Greening and firm performance

(1) (2) (3) (4) (5) (6)

Green Product or Service (Tangible-External) 0.164*** 0.117*** 0.198**

(0.0413) (0.0425) (0.0775)

Env. Mang. Sys (Intangible-External) −0.0103 −0.0199 0.0436

(0.0415) (0.0418) (0.0659)

Green Employees Prop. (Tangible-Internal) 0.132*** 0.0949*** 0.114***

(0.0437) (0.0363) (0.0429)

Beyond Compliance (Intangible-Internal) 0.189*** 0.148*** 0.211***

(0.0452) (0.0453) (0.0668)

Number of Green Strategies −0.0609(0.0476)

Financial Support 0.106 0.115*

(0.0651) (0.0653)

Non-financial Support −0.0399 −0.0345(0.0408) (0.0411)

Companies 0.242*** 0.243***

(0.0397) (0.0397)

Public Bodies 0.0183 0.0194

(0.0426) (0.0425)

Age −0.00976*** −0.00966*** −0.00973*** −0.00956*** −0.00945*** −0.00946***(0.00113) (0.00113) (0.00114) (0.00114) (0.00115) (0.00115)

Employees: 10–49 0.433*** 0.442*** 0.454*** 0.432*** 0.420*** 0.424***

(0.0444) (0.0445) (0.0445) (0.0444) (0.0450) (0.0451)

Employees: 50–249 0.638*** 0.645*** 0.661*** 0.615*** 0.610*** 0.616***

(0.0726) (0.0729) (0.0729) (0.0738) (0.0752) (0.0750)

Employees > 250 0.986*** 1.011*** 1.022*** 0.947*** 0.924*** 0.941***

(0.141) (0.142) (0.140) (0.138) (0.142) (0.142)

Manufacturing −0.0200 −0.0269 −0.0265 −0.0217 −0.0323 −0.0327(0.0529) (0.0528) (0.0528) (0.0529) (0.0539) (0.0539)

Retail 0.0349 0.0363 0.0398 0.0357 0.0620 0.0599

(0.0491) (0.0490) (0.0490) (0.0490) (0.0493) (0.0494)

Services 0.00954 −0.00707 −0.00466 −0.00824 0.00525 0.00331

(0.0478) (0.0477) (0.0477) (0.0477) (0.0484) (0.0484)

Country Effects Yes Yes Yes Yes Yes Yes

Constant cut1 −0.429*** −0.481*** −0.454*** −0.434*** −0.301** −0.311**(0.150) (0.150) (0.150) (0.148) (0.150) (0.150)

Constant cut2 0.389*** 0.334** 0.363** 0.383*** 0.526*** 0.516***

(0.150) (0.150) (0.150) (0.148) (0.149) (0.149)

Observations 9236 9236 9236 9236 9236 9236

R2 0.0807 0.0790 0.0804 0.0809 0.0879 0.0881

χ2 728.5 707.6 725.2 726.9 814.1 819.5

Robust standard errors in parentheses

***p < 0.01; **p < 0.05; *p < 0.1

Which green matters for whom? Greening and firm performance across age and size distribution of firms 957

Table 5 Greening and firm performance by firm age

(1) (2) (3)Age<=10 years

Age10–49 years

Age> 50 years

Green Product or Service (Tangible-External) 0.448*** 0.0876 0.344

(0.139) (0.102) (0.257)

Env. Mang. Sys (Intangible-External) 0.139 0.0558 0.210

(0.119) (0.0854) (0.254)

Green Employees Prop. (Tangible-Internal) 0.346*** 0.111*** 0.158

(0.126) (0.0427) (0.280)

Beyond Compliance (Intangible-Internal) 0.424*** 0.151* 0.133

(0.123) (0.0867) (0.278)

Number of Green Strategies −0.189** −0.0460 −0.149(0.0920) (0.0612) (0.180)

Financial Support 0.124 0.109 −0.106(0.103) (0.0917) (0.285)

Non-financial Support −0.0387 −0.0496 0.163

(0.0691) (0.0545) (0.152)

Companies 0.302*** 0.210*** 0.186

(0.0640) (0.0538) (0.162)

Public Bodies 0.115 −0.0133 0.247

(0.0749) (0.0553) (0.154)

Employees: 10–49 0.634*** 0.434*** 0.314

(0.0807) (0.0584) (0.201)

Employees: 50–249 0.475** 0.734*** 0.511**

(0.197) (0.0864) (0.216)

Employees>250 1.023*** 0.906*** 0.827***

(0.370) (0.185) (0.274)

Age -0.0584*** -0.00827*** 0.00574*

(0.0112) (0.00286) (0.00302)

Manufacturing −0.0767 0.0684 −0.255(0.0927) (0.0728) (0.197)

Retail 0.0926 0.0830 0.0922

(0.0814) (0.0664) (0.242)

Services −0.0510 0.0579 −0.148(0.0757) (0.0682) (0.212)

Country Effects Yes Yes Yes

Constant cut1 −0.538** −0.247 0.409

(0.246) (0.222) (0.359)

Constant cut2 0.295 0.634*** 1.247***

(0.245) (0.222) (0.365)

Observations 2759 5505 972

R2 0.107 0.0923 0.138

χ2 379.5 517.9 185.8

Robust standard errors in parentheses

***p < 0.01; **p < 0.05; *p < 0.1

958 M. Shrivastava, J. P. Tamvada

where GS1–GS4 are the four greening strategies(tangible-external, intangible-external, tangible-internal and intangible-internal). In addition to thesecore independent variables and firm age and size

controls, numgreen controls for the number of greenstrategies adopted a firm, externalsupport for finan-cial and non-financial external support received by afirm, markettype for the different types of markets a

Table 6 Greening and firm performance by firm size

(1) (2) (3)Employees< 50

Employees50–249

Employees> 250

Green Product or Service (Tangible-External) 0.171** 0.452** 0.227

(0.0813) (0.198) (0.216)

Env. Mang. Sys (Intangible-External) 0.0321 0.216 −0.162(0.0686) (0.189) (0.262)

Green Employees Prop. (Tangible-Internal) 0.0734* 0.304 0.770**

(0.0374) (0.237) (0.323)

Beyond Compliance (Intangible-Internal) 0.184*** 0.255 0.764***

(0.0701) (0.181) (0.230)

Number of Green Strategies −0.0269 −0.189 −0.148(0.0493) (0.134) (0.160)

Financial Support 0.172** −0.499*** −0.129(0.0697) (0.171) (0.244)

Non-financial Support 0.00208 −0.331*** 0.0989

(0.0428) (0.121) (0.194)

Companies 0.272*** 0.0741 0.263

(0.0412) (0.127) (0.189)

Public Bodies 0.0257 0.0400 −0.114(0.0447) (0.115) (0.180)

Age −0.00938*** 0.000671 0.000322

(0.00128) (0.00216) (0.00244)

Manufacturing −0.0360 0.326** 0.131

(0.0577) (0.134) (0.224)

Retail 0.0482 0.445*** −0.576*(0.0510) (0.164) (0.316)

Services 0.0135 0.338** 0.639***

(0.0502) (0.152) (0.240)

Country Effects Yes Yes Yes

Constant cut1 −0.363** −0.139 −0.959*(0.154) (0.524) (0.546)

Constant cut2 0.463*** 0.678 −0.109(0.154) (0.516) (0.558)

Observations 6918 1676 642

R2 0.0800 0.107 0.270

χ2 657.3 175.6 1286

Robust standard errors in parentheses

***p < 0.01; **p < 0.05; *p < 0.1

Which green matters for whom? Greening and firm performance across age and size distribution of firms 959

Table 7 Greening and firm performance (multiple greening strategies)

(1) (2) (3) (4)

Green Product or Service (Tangible-External) 0.198** 0.186**

(0.0775) (0.0781)

Env. Mang. Sys (Intangible-External) 0.0436 0.0357

(0.0659) (0.0669)

Green Employees Prop. (Tangible-Internal) 0.114*** 0.112***

(0.0429) (0.0424)

Beyond Compliance (Intangible-Internal) 0.211*** 0.196***

(0.0668) (0.0684)

Number of Green Strategies 0.0654*** −0.0609(0.0175) (0.0476)

1 Green Strategy 0.0127 −0.0871(0.0445) (0.0636)

2 Green Strategies 0.0642 −0.154(0.0511) (0.0982)

3 Green Strategies 0.213*** −0.146(0.0671) (0.151)

4 Green Strategies 0.354*** −0.129(0.117) (0.224)

Financial Support 0.109* 0.115* 0.110* 0.115*

(0.0651) (0.0653) (0.0653) (0.0655)

Non-financial Support −0.0320 −0.0345 −0.0342 −0.0360(0.0408) (0.0411) (0.0407) (0.0410)

Companies 0.246*** 0.243*** 0.245*** 0.242***

(0.0398) (0.0397) (0.0397) (0.0397)

Public Bodies 0.0244 0.0194 0.0246 0.0200

(0.0425) (0.0425) (0.0425) (0.0426)

Age −0.00949*** −0.00946*** −0.00948*** −0.00946***(0.00115) (0.00115) (0.00115) (0.00116)

Employees: 10–49 0.408*** 0.424*** 0.406*** 0.422***

(0.0448) (0.0451) (0.0448) (0.0451)

Employees: 50–249 0.581*** 0.616*** 0.573*** 0.609***

(0.0752) (0.0750) (0.0756) (0.0754)

Employees > 250 0.890*** 0.941*** 0.870*** 0.925***

(0.141) (0.142) (0.141) (0.142)

Manufacturing −0.0337 −0.0327 −0.0325 −0.0318(0.0538) (0.0539) (0.0539) (0.0540)

Retail 0.0683 0.0599 0.0682 0.0604

(0.0493) (0.0494) (0.0493) (0.0494)

Services 0.00888 0.00331 0.00912 0.00405

(0.0484) (0.0484) (0.0484) (0.0484)

Country Effects Yes Yes Yes Yes

Constant cut1 −0.317** −0.311** −0.349** −0.334**(0.152) (0.150) (0.152) (0.150)

Constant cut2 0.507*** 0.516*** 0.475*** 0.493***

(0.152) (0.149) (0.152) (0.150)

Observations 9236 9236 9236 9236

R2 0.0858 0.0881 0.0863 0.0883

χ2 787.5 819.5 793.1 823.3

Robust standard errors in parentheses

***p < 0.01; **p < 0.05; *p < 0.1

960 M. Shrivastava, J. P. Tamvada

firm caters to, sector for the industrial sector andlocation for the country of a firm’s geographic location.

4 Empirical results

The empirical results linking the four greening strategieswith firm performance are presented in Table 4. As thepositive and significant coefficient of the ‘Green Prod-uct or Service’ variable in column (1) suggests, tangible-external greening strategy has a positive impact on firmperformance. However, the coefficient of ‘Env. Mang.Sys.’ in column (2) is insignificant suggesting that anintangible-external greening strategy has no impact onfirm performance. The coefficients of the internal green-ing variables in columns (3) and (4) suggest that bothforms of internal greening have a positive impact onfirm performance. In column (5), all greening variablesare jointly introduced in the estimation, and in column(6) the number of greening strategies pursued by thefirms is introduced in the estimation as an additionalcontrol. The results in column (6) are consistent with theresults in columns (2), (3), (4), and (5). Thus, the resultspartially support hypothesis H1a while stronglysupporting hypothesis H1b.6

The estimated effects of the control variables suggestthat while external financial support and offering prod-ucts and services to companies have significantly posi-tive effects, the number of greening strategies and non-financial support have an insignificant effect on firmperformance.

While the empirical results in Table 4 suggest thatgreening strategies have a positive impact on firm

performance, they do not show which type of green-ing matters for whom. In Table 5, we examine theimpact for greening on firm performance along theage distribution to test the hypotheses H2 and H3 inthe context of young, middle-aged and old firms.Consistent with the hypothesis H2a, the results incolumn (1) suggest that having a tangible-externalgreening strategy in the form of offering a greenproduct or service has resulted in an increase inturnover for young entrepreneurial firms. However,consistent with hypothesis H2b, the coefficients forthe ‘Tangible-External’ variable in columns (2) and(3) are insignificant suggesting that tangible-externalgreening has no impact on middle-aged and maturefirms. Consistent with the hypothesis H3a, the inter-nal greening strategies have a positive impact onfirm performance for young firms as suggested bythe positive coefficients on ‘Green EmployeesProp.’ and ‘Beyond Compliance’ variables in col-umn (1). Although these coefficients are positiveand significant for middle-aged firms, they are in-significant for the oldest firms suggesting that inter-nal greening strategies have a positive impact on theperformance for young and middle-aged firms butnot old firms. Thus, the results partially supportH3b.

In Table 6, the impact of greening strategies onfirm performance is examined along the sized dis-tribution of the firms in the database to test thehypotheses H2 and H3 in the context of small,mid-sized, and large firms. Consistent with the hy-pothesis H2a, the results suggest that tangible-external greening strategy has a positive impact onfirm performance for small firms, and consistentwith the hypothesis H2b, the impact of tangible-external greening strategy decreases along the sizedistribution. Although it benefits mid-sized firms, ithas no significant impact on the performance oflarge firms. Consistent with the hypothesis H3a,both tangible as well as intangible internal greeningstrategies have a positive impact on the perfor-mance of small firms. While they do not have asignificant impact on performance for mid-sizedfirms, the internal greening strategies have a posi-tive impact on the performance of large firms sug-gesting that as firms mature, they need to movefrom external greening strategies to internal green-ing strategies. Thus, the results partially supportH3b.

6 The marginal effects of the ordered probit estimation in column(6) of Table 4 are presented in Table 8 to quantify the estimatedimpact of greening strategies on firm performance. The estimatedmarginal effects suggest that while introducing a green product orservice increases the likelihood of a firm reporting increasedturnover by 7.4 percentage points, a 1% increase in the propor-tion of green employees increases the likelihood of a firmreporting increased turnover by 4.2 percentage points, and goingbeyond compliance requirements increases the likelihood of afirm reporting increased turnover by 7.9 percentage points. Forbrevity, we have not included the marginal effect estimations forother regressions equations in the paper, but these are availablefrom the authors. Furthermore, we check for potential biasesresulting from data collection and the robustness of results pre-sented in Table 3 by excluding firms following all four greeningstrategies from the sample in Table 9. The empirical results areconsistent with the results in Table 3, and confirm the robustnessof the results presented in Table 3.

Which green matters for whom? Greening and firm performance across age and size distribution of firms 961

An important aspect of the above results is thatthey do not explicitly consider firms pursuing mul-tiple greening strategies. To address this issue, inTable 7, the impact of following multiple greeningstrategies on firm performance is estimated in col-umn (1). The positive and significant coefficient ofthe variable ‘Num. Green Strategies’ suggests thatfollowing multiple greening strategies has a positiveimpact on firm performance. However, co-introducing the four greening strategies in column(2) makes the coefficient of the variable ‘Num.Green Strategies’ insignificant suggesting that theprimary effects of following these greening strate-gies are central to explaining the impact of greeningon firm performance. These results are replicated incolumns (3) and (4) that use dummy variables toindicate the number of greening strategies adoptedby a firm. The results in column (3) suggest thatsimultaneously pursuing 3 or 4 greening strategieshas a positive impact on firm performance. Howev-er, these effects disappear once the four greeningstrategies are introduced in column (4). Thus, theresults in Table 7 suggest that the primary effectshave a direct impact on firm performance.7

5 Conclusions

With ever-increasing consciousness about the envi-ronment, there is an increasing demand forsustainability-driven products and services. Emerg-ing studies along these lines suggest that sustainabledevelopment can be used by firms as a means ofearning profits (Cohen and Winn 2007; Dean andMcMullen 2007). This has led to a position thatsustainable development and green practices areroutes to competitive advantage (Esty and Winston2009; King and Lenox 2001). However, this broadliterature uses several different forms of greeninginterchangeably to examine the impact of greeningfor competitive advantage and performance. The

greening framework model developed in Section 2provides a basis for underpinning the role of differ-ent types of greening initiatives for firm perfor-mance and shows which type of greening mattersfor whom. In particular, the results suggest thatwhile both external and internal greening strategieshave an impact on firm performance for young firmsand small firms, internal greening strategies aremore important for middle-aged firms and largefirms.

Young entrepreneurial firms are more likely totarget an unaddressed niche to increases their likeli-hood of survival in the face of competition fromlarge incumbents (Bhide 1994). This potentially re-sults in the same external greening strategy having adifferential impact on firm performance across theage distribution. For these young firms, tangible-external greening provides an opportunity to dealwith the liability of newness (Stinchcombe 1965).Although green product innovation literature ad-dresses environmental issues explicitly, it is far fromcertain whether these products can truly achievemarket success (Pujari 2006). In this context, theresults suggest that green product innovation maybe more crucial for entrepreneurial firms thanincumbents.

Furthermore, the results suggest that as firmsmature, they need to change their greening strate-gies and shift from external greening to internalgreening activities. One potential cause may bethat as firms mature, they need to undertake de-monstrable internal greening activities to affirmtheir green commitments to employees and otherstakeholders. In addition to this, the results suggestthat although firms may follow multiple greeningstrategies, the effects of the primary four greeningstrategies can directly explain the variation in firmperformance that is attributable to greening.

The main limitation of this study is that the mea-sure of firm performance is a categorical variablethat measures if a firm’s turnover has decreased,remained same, or increased over the last 2 yearswhile the magnitude of this change is not known. Achange over a 2-year period can provide limitedinsight into the determinants of firm performanceover a longer time period. This is particularly rele-vant as recent research suggests that there is inherentrandomness in firm growth (Coad et al. 2013). Inaddition to this, most of the independent variables,

7 Table 10 presents a summary table showing the co-occurrence ofmultiple greening strategies. To further examine the role of multiplicityof greening strategies for firm performance and check for robustness ofthese results, Table 11 explicitly introducesmultiple greening strategiesvariables in the estimation. The empirical results are broadly consistentwith the results of Table 7 and suggest that the effects of the fourgreening strategies can explain the impact of greening on firmperformance.

962 M. Shrivastava, J. P. Tamvada

with the exception of the age variable, are categor-ical in nature. Future research can overcome theselimitations by using an alternate database that hascontinuous data over a longer time period. Further-more, future research can examine the impact ofthese greening strategies across different industrysectors and country contexts, particularly with re-gard to the multiplicity of greening strategies.

To conclude, the paper presents a novel framework forcontextualising greening by firms through the lens oftangibility and visibility of its greening activities. By

classifying greening actives as externally tangible, exter-nally intangible, internally tangible and internally intangi-ble, the paper provides a compelling tool for examininghow greening activities impact firm performance. Further-more, by examining the impact of greening along the agedistribution and the size distribution of firms, the paperprovides novel insights into the role of age and size for thelink between greening and performance.

Table 8 Greening and firm performance (marginal effects of Table 4 col. (6))

(1) (2) (3)Decrease No Change Increase

Green Product or Service (Tangible-External) -0.071*** -0.002 0.074**

(0.009) (0.281) (0.012)

Env. Mang. Sys (Intangible-External) -0.016 -0.000 0.016

(0.506) (0.823) (0.509)

Green Employees Prop. (Tangible-Internal) -0.042*** 0.000 0.042***

(0.008) (0.898) (0.008)

Beyond Compliance (Intangible-Internal) -0.075*** -0.004 0.079***

(0.001) (0.161) (0.002)

Number of Green Strategies 0.022 -0.000 -0.022

(0.201) (0.898) (0.201)

Financial Support -0.041* -0.002 0.043*

(0.072) (0.412) (0.083)

Non-financial Support 0.013 -0.000 -0.013

(0.402) (0.739) (0.399)

Companies -0.090*** 0.003* 0.088***

(0.000) (0.091) (0.000)

Public Bodies -0.007 -0.000 0.007

(0.648) (0.931) (0.649)

Age 0.003*** -0.000 -0.003***

(0.000) (0.898) (0.000)

Employees: 10–49 -0.145*** -0.017*** 0.162***

(0.000) (0.000) (0.000)

Employees: 50–249 -0.192*** -0.048*** 0.240***

(0.000) (0.000) (0.000)

Employees > 250 -0.255*** -0.106*** 0.362***

(0.000) (0.000) (0.000)

Industry Effects Yes Yes Yes

Country Effects Yes Yes Yes

Observations 9236

R2 0.0881

χ2 819.5

Appendix

Which green matters for whom? Greening and firm performance across age and size distribution of firms 963

Table 9 Greening and firm performance (robustness checks)

(1) (2) (3) (4) (5) (6)

Green Product or Service (Tangible-External) 0.144*** 0.111** 0.195**(0.0430) (0.0437) (0.0778)

Env. Mang. Sys (Intangible-External) -0.0408 -0.0275 0.0382

(0.0429) (0.0431) (0.0662)Green Employees Prop. (Tangible-Internal) 0.114*** 0.0875** 0.108***

(0.0400) (0.0358) (0.0415)

Beyond Compliance (Intangible-Internal) 0.169*** 0.141*** 0.207***(0.0476) (0.0474) (0.0677)

Number of Green Strategies -0.0640

(0.0476)Financial Support 0.105 0.114*

(0.0663) (0.0665)

Non-financial Support -0.0455 -0.0397(0.0415) (0.0417)

Companies 0.239*** 0.240***

(0.0403) (0.0403)Public Bodies 0.0228 0.0241

(0.0434) (0.0434)

Age -0.00992*** -0.00986*** -0.00993*** -0.00972*** -0.00960*** -0.00961***(0.00118) (0.00118) (0.00119) (0.00119) (0.00120) (0.00120)

Employees: 10–49 0.437*** 0.443*** 0.453*** 0.437*** 0.424*** 0.428***

(0.0452) (0.0453) (0.0453) (0.0452) (0.0458) (0.0459)Employees: 50–249 0.664*** 0.668*** 0.677*** 0.644*** 0.645*** 0.651***

(0.0760) (0.0763) (0.0765) (0.0770) (0.0782) (0.0780)

Employees > 250 0.919*** 0.930*** 0.933*** 0.881*** 0.869*** 0.887***(0.154) (0.154) (0.152) (0.150) (0.153) (0.153)

Industry Effects Yes Yes Yes Yes Yes Yes

Country Effects Yes Yes Yes Yes Yes YesConstant cut1 -0.438*** -0.488*** -0.462*** -0.442*** -0.312** -0.323**

(0.151) (0.151) (0.151) (0.150) (0.151) (0.151)

Constant cut2 0.388** 0.337** 0.363** 0.384** 0.523*** 0.512***(0.151) (0.151) (0.151) (0.149) (0.151) (0.151)

Observations 8757 8757 8757 8757 8757 8757

R2 0.0792 0.0780 0.0790 0.0793 0.0860 0.0862X2 690.2 675.3 691.8 688.4 768.8 775.6

Robust standard errors in parentheses

***p < 0.01; **p < 0.05, *p < 0.1

The sample excludes firms that reported following all four greening strategies

964 M. Shrivastava, J. P. Tamvada

Table 10 Multiplicity of greening strategies

GS1 Green Product or Service (Tangible-External) 30.30%GS2 Env. Mang. Sys (Intangible-External) 38.60%

GS3 Has Green Employees 43.80%

GS4 Beyond Compliance (Intangible-Internal) 26.10%GS12 13.20%

GS13 22.00%

GS14 10.90%

GS23 21.00%GS24 13.20%

GS34 14.90%

GS123 10.60%GS124 6.12%

GS134 8.56%

GS234 9.00%GS1234 5.19%

N 9236

Table 11 Greening and firm performance (multiplicity of greening strategies)

2 Modes 3 Modes 4 Modes

GS1. Green Product or Service (Tangible-External) 0.213** 0.251*** 0.252***

(0.0889) (0.0905) (0.0906)

GS2. Env. Mang. Sys (Intangible-External) 0.0720 0.0820 0.0821

(0.0737) (0.0756) (0.0756)

GS3. Green Employees Prop. (Tangible-Internal) 0.0877** 0.101** 0.101**

(0.0435) (0.0435) (0.0434)

GS4. Beyond Compliance (Intangible-Internal) 0.138* 0.176** 0.175**

(0.0766) (0.0803) (0.0803)

GS12 -0.0913 -0.188* -0.187*

(0.0905) (0.110) (0.111)

GS13 -0.0170 -0.108 -0.106

(0.0730) (0.0943) (0.0966)

GS14 0.0916 -0.0721 -0.0693

(0.0984) (0.127) (0.131)

GS23 -0.000627 0.0315 0.0369

(0.0716) (0.149) (0.162)

GS24 0.0275 -0.0505 -0.0477

(0.0968) (0.124) (0.127)

GS34 0.203** 0.0761 0.0861

(0.0943) (0.207) (0.255)

GS123 0.0527 0.0444

(0.170) (0.191)

GS124 0.304 0.296

(0.206) (0.227)

GS134 0.302 0.286

(0.219) (0.306)

GS234 -0.156 -0.180

(0.212) (0.338)

Which green matters for whom? Greening and firm performance across age and size distribution of firms 965

Table 11 (continued)

2 Modes 3 Modes 4 Modes

GS1234 0.0391

(0.441)

Number of Green Strategies -0.0692 -0.0641 -0.0647

(0.0464) (0.0471) (0.0478)

Financial Support 0.118* 0.115* 0.115*

(0.0654) (0.0655) (0.0655)

Non-financial Support -0.0345 -0.0324 -0.0324

(0.0411) (0.0410) (0.0410)

Companies 0.242*** 0.241*** 0.241***

(0.0397) (0.0398) (0.0398)

Public Bodies 0.0216 0.0227 0.0227

(0.0426) (0.0426) (0.0426)

Age -0.00950*** -0.00958*** -0.00958***

(0.00115) (0.00115) (0.00115)

Employees: 10–49 0.426*** 0.425*** 0.425***

(0.0451) (0.0452) (0.0452)

Employees: 50–249 0.624*** 0.624*** 0.624***

(0.0753) (0.0755) (0.0756)

Employees > 250 0.948***(0.143)

0.941***(0.142)

0.942***(0.143)

Industry Effects

Yes Yes Yes

Country Effects Yes Yes Yes

Constant cut1 -0.315** -0.308** -0.309**

(0.150) (0.150) (0.150)

Constant cut2 0.513*** 0.520*** 0.520***

(0.150) (0.150) (0.150)

Observations 9236 9236 9236

R2 0.0889 0.0894 0.0894

χ2 819.7 830.0 831.0

Robust standard errors in parentheses

***p < 0.01; **p < 0.05; *p < 0.1

966 M. Shrivastava, J. P. Tamvada

Which green matters for whom? Greening and firm performance across age and size distribution of firms 967

Acknowledgements We are thankful to two anonymous re-viewers for their constructive suggestions.

Open Access This article is distributed under the terms of theCreative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestrict-ed use, distribution, and reproduction in any medium, providedyou give appropriate credit to the original author(s) and the source,provide a link to the Creative Commons license, and indicate ifchanges were made.

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